THE SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA ACT, 1989 
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ARRANGEMENT OF SECTIONS 
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CHAPTER I 

PRELIMINARY 

SECTIONS 

1.  Short title, extent and commencement. 
2.  Definitions. 

CHAPTER II 
ESTABLISHMENT OF THE SMALL INDUSTRIES DEVELOPMENT BANK OF  
INDIA AND CAPITAL THEREOF 

3.  Establishment and incorporation of Small Industries Development Bank of India. 
4.  Authorised capital.  
4A. Conversion of equity shares into redeemable preference shares. 
4B. Transfer of capital. 
4C. Issued capital. 
4D. Reduction of share capital. 
4E. Restriction on exercising of voting right. 
5.  Management. 
6.  Constitution of Board. 
7.  [Omitted.] 
8.  Disqualification of directors.  
9.  Vacation and resignation of office by directors. 
10.  [Omitted.] 
11.  [Omitted.] 
12.  Executive Committee and other committees. 
12A. Fees and allowances of directors and members of committees. 

CHAPTER IV 

BUSINESS OF THE SMALL INDUSTRIES BANK 

13.  Business of Small Industries Bank. 
14.  Loans by Central Government. 
15.  Borrowings and acceptance of deposits by the Small Industries Bank. 
16.  Investment. 
17.  Power to transfer rights. 
18.  Power to acquire rights. 
19.  Loan in foreign currency. 
20.  Grants, donations, etc., to the Small Industries Bank. 

CHAPTER IVA 

SHARES 

20A. Free transferability of shares. 
20B. Register of shareholders. 
20C. Trust not to be entered on the register of shareholders. 
20D. Board’s right to refuse registration of transfer of shares. 

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SECTIONS 

20E. Shares to be securities under the Indian Trusts Act, 1882. 

CHAPTER IVB 

MEETINGS AND PROCEEDINGS 

20F. Annual general meeting. 
20G. Matters to be discussed and procedure in annual general meeting. 

CHAPTER V 

SMALL INDUTRIES DEVELOPMENT ASSISTANCE FUND 

21.  Small Industries Development Assistance Fund. 
22.  Credits to Small Industries Development Assistance Fund. 
23.  Utilisation of Small Industries Development Assistance Fund. 
24.  Debits to Small Industries Development Assistance Fund. 
25.  Accounts and audit of Small Industries Development Assistance Fund. 
26.  Liquidation of Small Industries Development Assistance Fund. 

CHAPTER VI 

SMALL INDUSTRIES GENERAL, FUND, ACCOUNTS AND AUDIT 

27.  Small Industries General Fund. 
28.  Preparation of accounts and balance-sheet. 
29.  Disposal of profits accruing to Small Industries General Fund. 
30.  Audit. 
31.  Saving. 

CHAPTER VII 

TRANSFER OF PART OF BUSINESS OF DEVELOPMENT BANK 

32.  Transfer of part of business of Development Bank. 

CHAPTER VIII 

MISCELLANEOUS 

33.  Staff of Small Industries Bank. 
34.  Delegation of powers. 
35.  Returns. 
36.  Obligations as to fidelity and secrecy.  
37.  Defects in appointment not to invalidate acts, etc. 
37A. Amounts and securities to be held in trust. 
38.  Rights of Small Industries Bank in case of default. 
39.  Power to seek assistance of Chief Metropolitan Magistrate or District Magistrate. 
40.  Power to call for repayment before agreed period. 
41.  Special provisions for enforcement of claims by Small Industries Bank. 
42.  Small Industries Bank to have access to records. 
43.  Validity of loan or advance not to be questioned. 
44.  Indemnity of Directors. 
45.  Protection of action taken under this Act. 

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SECTIONS 

46.  Nomination by depositors or holders of bonds or other securities. 
47.  Arrangement with Small Industries Bank on appointment of directors to prevail. 
48.  Act 18 of 1891 to apply in relation to Small Industries Bank. 
49.  Act 10 of 1949 not to apply to Small Industries Bank. 
50.  [Omitted.] 
51.  Liquidation of Small Industries Bank. 
51A. Power to make rules by Central Government. 
52.  Power to make regulations. 
53.  [Repealed]. 
54.  Power to remove difficulties. 

THE FIRST SCHEDULE. 

THE SECOND SCHEDULE. [REPEALED.] 

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THE SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA ACT, 1989 

ACT NO. 39 OF 1989 

An  Act  to  establish  the  Small  Industries  Development  Bank  of  India  as  the  principal  financial 
institution for the promotion, financing and development of industry in the small-scale sector 
and  to  co-ordinate  the  functions  of  the  institutions  engaged  in  the  promotion,  financing  or 
developing  industry  in  the  small-scale  sector  and  for  matters  connected  therewith  or 
incidental thereto. 

BE it enacted by Parliament in the Fortieth Year of the Republic of India as follows:— 

[25th October, 1989.] 

CHAPTER I 

PRELIMINARY 

1.  Short  title,  extent  and  commencement.—(1)  This  Act  may  be  called  the  Small  Industries 

Development Bank of India Act, 1989. 

(2) It extends to the whole of India. 
(3) It shall come into force on such date1 as the Central Government may, by notification, appoint and 

different dates may be appointed for different provisions of this Act. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(a)  “Board”  means  the  Board  of  directors  of  the  Small  Industries  Development  Bank  of  India 

referred to in section 5; 

2[(b) “chairman and managing director” means the chairman and managing director referred to in 

clause (a) of sub-section (1) of section 6;] 

(c)  “Court” means the High Court within the local limits of whose jurisdiction,— 

(i) the defendant or respondent or, where there is more than one defendant or respondent, any 

one of them— 

(1) has his registered office, or 

(2) carries on the whole or part of his business, 

at the time of commencement of any legal proceedings against him under this Act, or 

(ii) the cause of action for such legal proceedings, wholly or in part, arises; 

(d)   “Development  Bank”  means  the  Industrial  Development  Bank  of  India  established  under 

section 3 of the Industrial Development Bank of India Act,1964 (18 of 1964); 

(e)   “Director”  means  a  Director  nominated  under  sub-section  (1)  of  section  6  and  includes 

the 3[chairman and managing director and whole-time director]; 

(f)   “export”  means  export  from  India  of  products  or  services  of  any  industrial  concern  in              

small-scale sector; 

4[(fa)   “General  Insurance  Corporation”  means  the  General  Insurance  Corporation  of  India 

formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972);] 

1.7th  March,  1990,  vide  notification  No.  S.O.  197(E),  dated  7th  March,  1990,  see  Gazette  of  India,  Extraordinary,                      

Part II, sec. 3(ii). 

2. Subs by Act 7 of 2000, s. 2, for clause (b) (w.e.f. 27-3-2000). 
3. Subs, by s. 2, ibid., for “Managing Director” (w.e.f. 27-3-2000). 
4. Ins. by s. 2, ibid. (w.e.f. 27-3-2000). 

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(g) “import”  means  import  into  India  of  services  or goods  including  all  materials,  commodities 
and  articles  in  a  solid,  liquid  or  gaseous  state  and  all  forms  of  energy  for  the  use  of  any  industrial 
concern in the small-scale sector; 

 1[(h) “industrial concern in the small scale sector” means any concern engaged or to be engaged 

in,— 

(i) the manufacture, preservation or processing of goods; 

(ii) shipping; 

(iii) mining including development of mines; 

(iv) the hotel industry; 

(v) the transport of passengers or goods by road or by water or by air or by ropeway or by lift; 

(vi) the generation, storage or distribution of electricity or any other form of energy; 

(vii)  the  maintenance,  repair,  testing  or  servicing  of  machinery  or  equipment  of  any 

description or vehicles or vessels or motor boats or trailers or tractors; 

(viii) assembling, repairing or packing any article with the aid of machinery or power; 

(ix) the setting up of, or development of, an industrial area or an industrial estate; 

(x) fishing or providing shore facilities for fishing or maintenance thereof; 

(xi) providing special or technical knowledge or other services for the promotion of industrial 

growth; 

(xii) providing engineering, technical, financial, management, marketing or other services or 

facilities for industry; 

(xiii)  service  industry  such  as  altering,  ornamenting,  polishing,  finishing,  oiling,  washing, 
cleaning  or  otherwise  treating  or  adapting  any  article  or  substance  with  a  view  to  its  use,  sale, 
transport, delivery or disposal; 

(xiv) providing medical, health or other allied services; 

(xv) providing services relating to information technology, telecommunication or electronics; 

(xvi)  leasing,  sub-leasing  or  giving  on  hire-purchase  of  industrial  plants,  equipments, 

machinery or other assets including vehicles, ships and aircraft; 

(xvii) such other activity as the Central Government may, having regard to the objects of this 

Act, by notification, specify in this behalf; or 

(xviii) the research and development of any concept, technology, design, process or product 

whether  in  relation  to  any  of  the  matters  aforesaid,  including  any  activities  specified  under             
sub-clause (xvii), or any other matter and which is regarded as a small-scale undertaking under 
section 11B of the Industries (Development and Regulation) Act, 1951(65 of 1951); 

Explanation.—The  expression  “processing  of  goods”  includes  any  art  or  process  for  producing, 
preparing or making an article by subjecting any material to a manual, mechanical, chemical, electrical or 
any other like operation.] 

2[(ha) “Life Insurance Corporation” means the Life Insurance Corporation of India established under 
section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);] 
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1. Subs. by Act 53 of 2003, s. 2, and The Schedule (w.e.f. 2-7-2004). 
2. Ins. by Act 7 of 2000, s. 2 (w.e.f. 27-3-2000). 
3. Clause (i) omitted by s. 2, ibid. (w.e.f. 27-3-2000). 

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(j) “National Small Industries Corporation” means the National Small Industries Corporation Limited 

registered under the Companies Act, 1956 (1 of 1956); 

(k)  “notification” means a notification published in the Official Gazette; 

(l) “prescribed” means prescribed by regulations made under this Act; 
1[(la) “public sector bank” means the State Bank of India constituted under the State Bank of India 
Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 
1959  (38  of  1959),  a  corresponding  new  bank  constituted  under  section  3  of  the  Banking  Companies 
(Acquisition  and  Transfer  of  Undertakings)  Act,  1970  (5  of  1970)  or  under  section  3  of  the  Banking 
Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);] 

2(lb) “Reserve Bank” means the Reserve Bank of India constituted under the Reserve Bank of India 

Act, 1934 (2 of 1934); 

(lc)  “scheduled  bank”  means  a  bank  for  the  time  being  included  in  the  Second  Schedule  to  the 

Reserve Bank of India Act, 1934 (2 of 1934);] 

(m) “Small  Industries  Bank”  means  the  Small  Industries  Development  Bank  of  India  established 

under sub-section (1) of section 3; 

(n) “State Small Industries Corporation” means a State Corporation, registered under the Companies 

Act, 1956 (1 of 1956), for small industries in a State; 

(o) “State Financial Corporation” means a financial corporation established under section 3 or section 

3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); 

(p) “State  Industrial  Development  Corporation”  means  a  State  Corporation  registered  under  the 

Companies Act, 1956 (1 of 1956) for the development of industries in a State; 

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CHAPTER II 
ESTABLISHMENT OF THE SMALL INDUSTRIES DEVELOPMENT BANK OF  
INDIA AND CAPITAL THEREOF 

 3. Establishment and incorporation of Small Industries Development Bank of India.—(1) With 
effect from such date as the Central Government may, by notification, appoint, there shall be established, 
for  the  purposes  of  this  Act,  a  corporation  to  be  known  as  the  Small  Industries  Development  Bank  of 
India. 

(2) The  Small  Industries  Bank  shall  be  a  body  corporate  with  the  name  aforesaid  having  perpetual 
succession  and  a  common  seal  with  power,  subject  to  the  provisions  of  this  Act,  to  acquire,  hold  and 
dispose of property and to contract, and may, by that name, sue or be sued. 

(3) The head office of the Small Industries Bank shall be at Lucknow or at such other place as the 

Central Government may, by notification, specify. 

(4) The Small Industries Bank shall establish offices, branches or agencies at any place in or outside 

India. 

4[4. Authorised capital.—The authorised capital of the Small Industries Bank shall be one thousand 
crores  of  rupees  divided  into  seventy-five  crores  fully  paid-up  equity  shares  of  rupees  ten  each  and 
twenty-five crores of fully paid-up redeemable preference shares of rupees ten each: 

Provided  that  the  Central  Government  may,  on  the  recommendation  of  the  Board,  by  notification, 
increase the authorised capital to an amount not exceeding two thousand crores of rupees consisting of 
such number of equity shares and redeemable preference shares as it may deem fit. 

1. Ins. by Act 7 of 2000, s. 2 (w.e.f. 27-3-2000). 
2.  Ins. by Act 53 of 2003, s. 12 and The Schedule (w.e.f. 2-7-2004). 
3. Clause (q) omitted by s. 12 and The Schedule, ibid. (2-7-2004). 
4. Subs. by Act 7 of 2000, s. 3, for sections 4 to 6 (w.e.f. 27-3-2000). 

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4A.  Conversion  of  equity  shares  into  redeemable  preference  shares.—(1)  The Central 
Government  may,  at  any  time  after  the  commencement  of  the  Small  Industries  Development  Bank  of 
India  (Amendment)  Act,  2000,  by  notification,  convert  such  number  of  equity  shares  held  by  the 
Development  Bank,  the  public  sector  banks,  the  General  Insurance  Corporation,  the  Life  Insurance 
Corporation and other institutions owned or controlled by the Central Government, not exceeding twenty-
five crores, as it may decide, into redeemable preference shares: 

Provided  that  such  conversion  shall  in  no  case  reduce  the  equity  shares  held  in  aggregate  by  the 
Development  Bank,  the  public  sector  banks,  the  General  Insurance  Corporation,  the  Life  Insurance 
Corporation and other institutions owned or controlled by the Central Government to less than fifty-one 
per cent. 

(2) The redeemable preference shares referred to in sub-section (1) shall— 

(a) carry such fixed rate of dividend as the Central Government may specify at the time of such 

conversion, and 

(b) neither be transferable nor carry any voting rights. 

(3) The redeemable preference shares referred to in sub-section (1) shall be redeemed by the Small 
Industries  Bank  within  three  years  from  the  date  of  such  conversion  in  such  instalments  and  in  such 
manner as the Board may determine. 

4B.  Transfer  of  capital.—On  such  date  as  the  Central  Government  may,  in  consultation  with  the 
Development Bank, by notification, specify (hereinafter referred to as “the specified date”), not less than 
fifty-one  per cent.  of the  issued  capital  of the  Small Industries  Bank  which has  been  subscribed by  the 
Development Bank as on the date immediately preceding the specified date shall, stand transferred to, and 
vested in, the public sector banks, the General Insurance Corporation, the Life Insurance Corporation and 
other institutions owned or controlled by the Central Government in such proportion, manner and on such 
terms and conditions as may be determined by that Government. 

4C. Issued capital.—(1) The issued capital, of the Small Industries Bank, of four hundred and fifty 
crores  of rupees, immediately  before the  commencement  of  the  Small  Industries  Development  Bank  of 
India (Amendment) Act, 2000, shall, on such commencement, stand divided into forty-five crores equity 
shares of rupees ten each. 

(2)  The  Board  may,  from  time  to  time,  increase  the  issued  equity  share  capital  or  redeemable 
preference share capital of the Small Industries Bank by allotment of shares to such persons and on such 
terms and conditions as the Board may determine: 

Provided  that  no  increase  in  the  issued  equity  capital  shall  be  made  in  such  a  manner  that  the 
Development  Bank,  the  public  sector  banks,  the  General  Insurance  Corporation,  the  Life  Insurance 
Corporation and other institutions owned or controlled by the Central Government, hold in aggregate at 
any time, less than fifty-one per cent. of the issued equity share capital of the Small Industries Bank. 

4D. Reduction of share capital.—(1) The Small Industries Bank may, with the prior approval of the 
Central  Government,  by  a  resolution  passed  in  a  general  meeting  of  the  shareholders,  reduce  its  share 
capital in any way. 

(2) Without prejudice to the generality of the foregoing power, the share capital may be reduced by— 

(a) extinguishing or reducing the liability on any of its equity shares in respect of the share capital 

not paid-up; 

(b)  either  with  or  without  extinguishing  or  reducing  liability  on  any  of  its  equity  shares, 

cancelling any paid-up share capital which is lost, or is unrepresented by available assets; or 

(c) either with or without extinguishing or reducing liability on any of its equity shares, paying 

off any paid-up share capital which is in excess of the wants of the Small Industries Bank. 

(3) In any general meeting referred to in sub-section (1), the resolution for reduction of share capital 
shall be passed by shareholders entitled to vote, voting in person, or, where proxies are allowed, by proxy, 

7 

 
and the votes cast in favour of the resolution are not less than three times the number of the votes, if any, 
cast against the resolution by shareholders so entitled and voting. 

4E.  Restriction  on  exercising  of  voting  right.—Every  shareholder  of  the  Small  Industries  Bank 
holding  equity  shares  shall  have  a  right  to  vote  in  respect  of  such  shares  on  every  resolution  and  his 
voting right on a poll shall be in proportion to his share of the paid-up equity share capital of the Small 
Industries Bank: 

Provided, however, that no shareholder, other than the Development Bank, the public sector banks, 
the  General  Insurance  Corporation,  the  Life  Insurance  Corporation  and  other  institutions  owned  or 
controlled by the Central Government, shall be entitled to exercise voting rights in respect of any equity 
shares held by him in excess of ten per cent. of the issued equity share capital. 

5.  Management.—(1)  The  general  superintendence,  direction  and  management  of  affairs  and 
business of the Small Industries Bank shall vest in a Board of Directors which may exercise all powers 
and do all such acts and things as may be exercised or done by the Small Industries Bank and are not by 
this Act expressly directed or required to be done by the Small Industries Bank in general meeting. 

(2) The Board may direct that any power exercisable by it under this Act shall also be exercisable in 
such cases and subject to such conditions, if any, as may be specified by it, by the chairman and managing 
director or the whole-time directors. 

(3) Subject to the provisions of this Act, the Board in discharging its functions shall act on 

business principles with due regard to public interest. 

6. Constitution of Board.—(1) The Board shall consist of the following, namely:— 

(a) a chairman and managing director appointed by the Central Government; 

(b) two whole-time directors appointed by the Central Government; 

(c)  two  directors  who  shall  be  officials  of  the  Central  Government  nominated  by  the  Central 

Government; 

(d) three directors to be nominated in the prescribed manner by the Development Bank, the public 
sector banks, the General Insurance Corporation, the Life Insurance Corporation and other institutions 
owned or controlled by the Central Government; 

(e) three directors, including one Director from the officials of the State Financial Corporations, 
nominated  by  the  Central  Government  from  amongst  the  persons  having  special  knowledge  of,  or 
professional  experience  in,  science,  technology,  economics,  industry,  banking,  industrial  co-
operatives,  law,  industrial  finance,  investment,  accountancy,  marketing  or  any  other  matter,  the 
special  knowledge  of,  or  professional  experience  in,  which  would,  in  the  opinion  of  the  Central 
Government, be useful to the Small Industries Bank; 

(f) such number of directors not exceeding four elected in the prescribed manner, by shareholders, 
other  than  the  Development  Bank,  the  public  sector  banks,  the  General  Insurance  Corporation,  the 
Life  Insurance  Corporation  and  other  institutions  owned  or  controlled  by  the  Central  Government, 
whose  names  are  entered  in  the  register  of  shareholders  of  the  Small  Industries  Bank  ninety  days 
before the date of the meeting in which such election takes place on the following basis, namely:— 

(i) where the total amount of equity share capital issued to such shareholders is ten per cent. 

or less of the total issued equity share capital, two directors; 

(ii) where the total amount of equity share capital issued to such shareholders is more than ten 
per cent. but less than twenty-five per cent. of the total issued equity share capital, three directors; 
and 

(iii) where the total amount of equity share capital issued to such shareholders is twenty-five 

per cent. or more of the total issued equity share capital, four directors: 

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Provided that if the percentage of holding of issued equity share capital with the shareholders, other 
than  the  Development  Bank,  the  public  sector  banks,  the  General  Insurance  Corporation,  the  Life 
Insurance  Corporation  and  other  institutions  owned  or  controlled  by  the  Central  Government,  does  not 
permit election of four directors or until the assumption of charge by the elected directors, the Board may 
at any time co-opt such number of directors, not exceeding four, from amongst the persons having special 
knowledge of, or professional experience in, science, technology, economics, industry, banking, industrial 
co-operatives, law, industrial finance, investment, accountancy, marketing or any other matter, the special 
knowledge of, or professional experience in, which would, in the opinion of the Board, be useful to the 
Small Industries Bank for carrying out its functions, who shall hold office until the assumption of charge 
by  the  elected  directors  and  an  equal  number  of  such  co-opted  directors  shall  retire  in  the  order  of                 
co-option. 

(2) The chairman and managing director and the whole-time directors shall hold office for such term 
not  exceeding  five  years  as  the  Central  Government  may  specify  in  this  behalf  and  any  person  so 
appointed shall be eligible for re-appointment. 

(3)  Notwithstanding  anything  contained  in  sub-section  (1),  the  Central  Government  shall  have  the 
right to terminate the term of office of the chairman and managing director or the whole-time director, as 
the case may be, at any time before the expiry of the term specified under sub-section (2) by giving him 
notice  of  not  less  than  three  months  in  writing  or  three  months’  salary  and  allowances  in  lieu  of  such 
notice and the chairman and managing director or the whole-time director, as the case may be, shall also 
have  the  right  to  relinquish  his  office  at  any  time  before  the  expiry  of  the  term  specified  under                      
sub-section (2) by giving, the Central Government, notice of not less than three months in writing. 

(4) The chairman and managing director and the whole-time directors shall receive such salary and 

allowances, as may be determined by the Central Government. 

(5)  The  Central  Government  may,  at  any  time,  remove  the  chairman  and  managing  director  or  the 

whole-time director, as the case may be, from office: 

Provided that no person shall be removed from his office, under this sub-section, unless he has been 

given an opportunity of showing cause against his removal. 

(6) Every Director nominated under clauses (c), (d) and (e) of sub-section (1), shall hold office during 

the pleasure of the authority nominating him. 

(7) Subject to the provisions of sub-section (6),— 

(a)  every  Director  nominated  under  clauses  (d)  and  (e)  of  sub-section  (1)  shall  hold  office  for 
such term not exceeding three years as the Central Government, or the authority nominating him, as 
the case may be, may specify in this behalf and thereafter until his successor assumes office, and shall 
be eligible for re-nomination: 

Provided that no such Director shall hold office continuously for a period exceeding six years; and 

(b) every Director elected under clause (f) of sub-section (1) shall hold office for three years and 

thereafter until his successor assumes office and shall be eligible for re-election: 

Provided that no such director shall hold office continuously for a period exceeding six years. 

(8)  The  shareholders,  other  than  the  Development  Bank,  the  public  sector  banks,  the  General 
Insurance Corporation, the Life Insurance Corporation and other institutions owned or controlled by the 
Central Government may, after giving the director a reasonable opportunity of being heard in the manner 
as may be prescribed, by resolution passed by majority of the votes of such shareholders holding in the 
aggregate not less than one-half of the equity share capital held by such shareholders, remove any director 
elected  under  clause  (f)  of  sub-section  (1)  and  elect  another  director  in  his  place  to  fill  the  vacancy  so 
caused. 

(9)  (i)  A  meeting  of  the  Board  shall  be  held  at  least  once  in  every  three  months  and  at  least  four 

meetings shall be held every year and the meetings may be held at such places as may be prescribed. 

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(ii) Notice of every meeting of the Board shall be given in writing to every Director for the time being 

in India, and at his usual address in India to every other Director. 

(10) Subject to the provisions contained in this Chapter, the Board may meet at such times and places 
and shall observe such rules of procedure in regard to transaction of its business including the manner of 
adoption of resolutions as may be prescribed. 

(11)  The  chairman  and  managing  director,  if  for  any  reason,  is  unable  to  attend  a  meeting  of  the 
Board,  any  other  Director  nominated  by  the  chairman  and  managing  director  in  this  behalf  and  in  the 
absence of such nomination, any director elected by the directors present from among themselves, shall 
preside at the meeting. 

(12) All questions which come up before any meeting of the Board shall be decided by a majority of 
votes  of  the  directors  present  and  voting,  and  in  the  event  of  an  equality  of  votes,  the  chairman  and 
managing director, or in his absence, the person presiding, shall have a second or casting vote. 
(13) Save as provided in sub-section (12), every Director of the Board shall have one vote.] 
7. [Managing Director.]—Omitted by the Small Industries Development Bank of India (Amendment) 

Act, 2000 (7 of 2000) s. 4 (w.e.f. 27-3-2000). 

1[8.  Disqualifications  of  directors.—A  person  shall  not  be  eligible  for  being  elected  as  a  director 

under clause (f) of sub-section (1) of section 6, if he— 

(a) has been found to be of unsound mind by a court of competent jurisdiction and the finding is 

in force; 

(b) is an undischarged insolvent; 
(c) has applied to be adjudicated as an insolvent and his application is pending; 
(d)  has  been  convicted  by  a  court  of  competent  jurisdiction,  of  any  offence  involving  moral 
turpitude and sentenced in respect thereof to imprisonment for not less than six months and a period 
of five years has not elapsed from the date of expiry of the sentence; or 

(e) has not paid any call in respect of shares of the Small Industries Bank held by him, whether 
alone or jointly with others, and six months have elapsed from the last day fixed for the payment of 
the call. 
9.  Vacation  and  resignation  of  office  by  directors.—(1)  The  office  of  a  director  shall  become 

vacant if he— 

(a) becomes subject to any of the disqualifications mentioned in section 8; or 

(b) resigns his office by giving notice in writing under his hand and the resignation is accepted; or 

(c) absents  himself  from  three  consecutive  meetings  of  the  Board  without  obtaining  leave  of 

absence from the Board. 

(2) Notwithstanding anything contained in clause (a) of sub-section (1), the disqualifications referred 

to in that clause shall not take effect— 

(a) for thirty days from the date of the adjudication, sentence or order; 

(b) where any appeal or petition is preferred within thirty days aforesaid against the adjudication, 
sentence or conviction resulting in the sentence or order until the expiry of seven days from the date 
on which such appeal or petition is disposed of; or 

(c) where within the seven days aforesaid, any further appeal or petition is preferred in respect of 
the adjudication, sentence, conviction or order and the appeal or petition, if allowed, would result in 
the removal of the disqualification, until such further appeal or petition is disposed of.] 

10.  [Causal  Vacancies  in  office  of  Managing  Director.]—Omitted  by  the  Small  Industries 

Development Bank of India (Amendment) Act, 2000 (7of 2000) s. 6 (w.e.f. 27-3-2000). 

11.  [Meetings of the Board.]—Omitted by s. 6, ibid. (w.e.f. 27-3-2000). 

1. Subs. by Act 7 of 2000, s. 5, for sections 8 and 9 (w.e.f. 27-3-2000). 

10 

 
 
 
 
                                                           
1[12.  Executive  Committee  and  other  committees.—(1)  The  Board  shall  constitute  an  Executive 
Committee  consisting  of  the  chairman  and  managing  director,  the  whole-time  directors  and  such  other 
directors as it may deem fit. 

(2) The Executive Committee shall discharge such functions as may be prescribed or as may, without 

prejudice to the provisions contained in section 34, be delegated to it by the Board. 

(3) The Board may constitute such other committees whether consisting wholly of directors or wholly 
of other persons or partly of directors and partly of other persons for such purpose or purposes as it may 
think fit. 

(4) The Executive Committee or any other committee constituted under this section shall meet at such 
times and places and shall observe such rules of procedure in regard to the transaction of business at its 
meetings as may be prescribed. 

12A.  Fees  and  allowances  of  directors  and  members  of  committees.—The directors  and  the 
members of a committee shall be paid such fees and allowances as may be prescribed for attending the 
meetings of the Board or of any committee constituted in pursuance of this Act and for attending to any 
other work of the Small Industries Bank: 

Provided that no fees shall be payable to the  chairman and managing director or to the  whole-time 

directors or to any other director who is an official of the Government.] 

CHAPTER IV 

BUSINESS OF THE SMALL INDUSTRIES BANK 

13.  Business  of  Small  Industries  Bank.—(1)  The  Small  Industries  Bank  shall  function  as  the 
principal financial institution for the promotion, financing and development of industrial concerns in the 
small-scale sector and shall also coordinate the functions of institutions engaged in promoting, financing 
and developing the industrial concerns in the small-scale sector and may carry on and transact any of the 
following business, namely:— 

2[(i) granting  loans  and  advances  to  any  State  Financial  Corporation,  State  Industrial 
Development  Corporation,  State  Small  Industries  Corporation,  scheduled  bank,  State  Cooperative 
Bank or such other financial institutions, approved by the Board in this behalf, by way of refinance on 
such terms and conditions as it may deem fit to impose, of any loans or advances granted to industrial 
concerns  in  the  small-scale  sector  by  such  corporation,  bank,  or  institution  or,  of  any  loans  or 
advances granted by the State Financial Corporation or State Industrial Development Corporation to 
any other industrial concern, which are repayable within a period not exceeding twenty-five years;] 

(ii) accepting, discounting or rediscounting bills of exchange and promissory notes made, drawn, 
accepted  or  endorsed  by  industrial  concerns  in  the  small-scale  sector  or  by  any  person  selling 
products manufactured by an industrial concern in the small-scale sector; 

(iii) subscribing  to,  or  purchasing  stocks,  shares  bonds  or  debentures  of,  any  State  Financial 
Corporation, State Industrial Development Corporation, State Small Industries Corporation, National 
Small Industries Corporation or 3[such other financial institutions as may be approved by the Board in 
this behalf]; 

(iv)  granting  lines  of  credit  or  loans  and  advances  to  any  State  Financial  Corporation,  State 
Industrial  Development  Corporation,  State  Small  Industries  Corporation,  National  Small  Industries 
Corporation or 3[such other financial institutions as may be approved by the Board in this behalf]; 

1. Subs. by Act 7 of 2000, s. 7, for section 12 (w.e.f. 27-3-2000). 
2. Subs. by s. 8, ibid.,  for clause (i) (w.e.f. 27-3-2000). 
3.  Subs.  by  s.  8,  ibid.,  for  “such  other  financial  institutions,  as  the  Central  Government  may,  on  the  recommendation  of  the 

Development Bank, specify” (w.e.f. 27-3-2000). 

11 

 
 
 
                                                           
(v) granting loans and advances to any industrial concern in the small-scale sector or subscribing 
to,  or  purchasing,  or  under-writing  the  issue  of  stocks,  shares,  bonds  or  debentures  of,  any  such 
concern: 

Provided that nothing  contained in this  clause shall be deemed to preclude the Small Industries 
Bank from granting loans or advances to, or subscribing to the debentures of, an industrial concern in 
the small-scale sector, the amounts outstanding thereon may be convertible at the option of the Small 
Industries Bank into stocks or shares of that concern within the period of loan, advance or debenture 
is repayable. 

Explanation.—In this clause, the expression “the amounts outstanding thereon” used in relation to 
any  loan  or  advance,  shall  mean  the  principal,  interest  and  other  charges  payable  on  such  loan  or 
advance as at the time when the amounts are sought to be converted into stocks or shares; 

(vi) granting loans and advances— 

(a) to any person exporting; or 

(b) to any person outside India, in connection with the export; or 

(c) for the execution of turn-key projects outside India by any industrial concern in the small-

scale sector; 

(vii) granting  loans  and  advances  to  a  scheduled  bank  or  any  other  bank  or  such  financial 
institutions 1[approved  by  the  Board  in  this  behalf],  by  way  of  refinance  of  loans  and  advances 
granted by it for purposes of export; 

(viii) accepting,  collecting,  discounting,  rediscounting,  purchasing,  selling  or  negotiating  in  or 
outside India, bills of exchange or promissory notes arising out of transactions, relating to export or 
import and granting of loans and advances in or outside India against such bills or promissory notes; 

(ix) granting,  opening,  issuing,  confirming  or  endorsing  letters  of  credit  and  negotiating  or 

collecting bills or other documents drawn thereunder; 

(x) granting lines of credit to the Government of any foreign State or any financial institution or 

person outside India for the purpose of export or import; 

(xi) financing export from or import into India of machinery, equipment or other assets including 
vehicles, ships and aircrafts on lease, sub-lease or hire purchase basis by or for any industrial concern 
in small-scale sector; 

(xii) buying  or  selling  of,  or  entering  into  such  other  dealings  in,  foreign  exchange,  as  may  be 

necessary for the discharge of the functions of the Small Industries Bank; 

(xiii) opening  of  any  account  in  any  bank  in  or  outside  India  or  making  of  any  agency 
arrangements  with,  or  acting  as  an  agent  or  correspondent  of,  any  bank  or  other  institution  in  or 
outside India; 

(xiv) transferring for consideration any instrument relating to loans and advances granted by it to 

any industrial concern in the small-scale sector; 

(xv) granting  loans  and  advances  to  any  person  for  purposes  of  investment  in  any  industrial 

concern in the small-scale sector; 

(xvi)  guaranteeing  loans  raised  from,  or  credit  arrangements  made  with,  any  bank,  financial 
institution or other lending agency in any country outside India in foreign currency, with the approval 
of the Central Government, by industrial concern in the small-scale sector; 

(xvii) guaranteeing deferred payments due from any industrial concern in the small-scale sector; 

1. Subs. by Act 7 of 2000, s. 8, for “as the Central Government may, on the recommendation of the Development Bank, specify” 

(w.e.f. 27-3-2000). 

12 

 
 
 
                                                           
(xviii) guaranteeing— 

(a) loans raised by industrial concerns in the small-scale sector which are floated in the public 

market, or 

(b) loans raised by any industrial concern in the small-scale sector from any scheduled bank 
or State Co-operative Bank or State Financial Corporation or State Industrial Corporation or such 
other financial institutions 1[as approved by the Board in this behalf]; 

(xix) guaranteeing  the  obligations  of  any  scheduled  bank  or  State  Co-operative  Bank  or  State 
Financial  Corporation  or  State  Industrial  Development  Corporation  or  State  Small  Industries 
Corporation or such other financial institutions 1[as approved by the Board in this behalf], arising out 
of,  or  in  connection  with,  underwriting  the  issue  of  stocks,  shares,  bonds  or  debentures  of  any 
industrial concern in the small-scale sector; 

(xx) providing factoring services to any industrial concern in the small-scale sector; 

(xxi) providing technical and financial consultancy, merchant banking and extension services; 

(xxii) undertaking  activities  for  promotion  of  industry  in  the  small-scale  sector  including 
entrepreneural  development  programmes,  raw  material  purchase,  marketing  support  and  promotion 
of, or financial support to, agencies engaged in such activities; 

(xxiii) acquiring, with the approval of  2[the Central Government], the undertaking including the 
business,  assets  and  liabilities  of  any  institution  the  principal object  of  which  is  the  promotion  or 
development of industry in the small-scale sector in India, or the grant of financial assistance for such 
promotion or development; 

(xxiv) leasing, sub-leasing or giving on hire or hire-purchase any movable or immovable assets to 

any industrial concern in the small-scale sector; 

(xxv) undertaking research and surveys for evaluating or dealing with marketing or investments 
and  undertaking  and  carrying  on  techno-economic  studies  in  connection  with  the  development  of 
industry in the small-scale sector; 

(xxvi) providing  technical,  legal,  marketing  and  administrative  assistance  to  any  industrial 
concern  in  the  small-scale  sector  or  any  person  for  promotion,  management  or  expansion  of  any 
industrial concern in the small-scale sector; 

(xxvii) planning, promoting and developing industries in the small-scale sector; 

(xxviii) promoting, forming or conducting or associating in the promotion, formation or conduct 

of companies, subsidiaries, societies, trusts or such other association of persons as it may deem fit; 

(xxix) acting as agent of— 

(a) the Central Government or of the Reserve Bank or of the Development Bank, or 
(b) such other Government or person as 3[the Board] may authorise; 

(xxx) doing  any  other  kind  of  business  which  the  Central  Government  may,  on  the 

recommendation of 3[the Board], authorise; 

(xxxi) generally doing such other acts and things as may be incidental to, or consequential upon, 
the exercise of its powers or the discharge of its duties under this Act or any other law for the time 
being in force including sale or transfer of any of its assets. 

(2)  The  Small  Industries  Bank  may  receive  in  consideration  of  any  of  the  services  mentioned  in             

sub-section (1) such commission, brokerage, interest, remuneration or fees as may be agreed upon. 

1. Subs. by Act 7 of 2000, s. 8, for “as the Central Government may, on the recommendation of the Development Bank, specify” 

(w.e.f. 27-3-2000). 

2. Subs. by s. 8, ibid., for “the Central Government on the recommendation of the Development Bank” (w.e.f. 27-3-2000). 
3. Subs. by s. 8, ibid., for “the Development Bank” (w.e.f. 27-3-2000). 

13 

 
                                                           
(3) The Small Industries Bank shall not grant any loan or advance or other financial accommodation 

on the security of its own bonds or debentures. 

14.  Loans  by  Central  Government.—The  Central  Government  may,  after  the  due  appropriation 

made by Parliament by law in this behalf, advance to the Small Industries Bank— 

(a) an  interest  free  loan  of  such  amount  and  repayable  in  such  instalments  and  in  such  other 

manner as may be determined by the Central Government; and 

(b) such further sums of money by way of loan on such terms and conditions as may be agreed 

upon: 

Provided  that  the  Central  Government  may,  on  a  request  being  made  to  it  by  the  Small  Industries 
Bank, increase the number of instalments or alter the amount of any instalment or vary the date on which 
any instalment is payable under clause (a). 

15.  Borrowings  and  acceptance  of  deposits  by  the  Small  Industries  Bank.—(1)  The  Small 

Industries Bank may, for the purpose of carrying out its functions under this Act,— 

(a) issue and sell bonds and debentures with or without the guarantee of the Central Government; 

(b) borrow money from the Reserve Bank— 

(i) repayable on demand or on the expiry of the fixed periods not exceeding ninety days from 
the date on which the money is so borrowed against the security of stocks, funds and securities 
(other than immovable property) in which a trustee is authorised to invest trust money by any law 
for the time being in force in India; 

(ii) against bills of exchange or promissory notes arising out of bona fide commercial or trade 
transactions, bearing two or more good signatures and maturing within five years from the date of 
the borrowing; 

(iii)  out  of  the  National  Industrial  Credit  (Long  Term  Operations)  Fund  established  under 
section 46C of the Reserve Bank of India Act, 1934 (2 of 1934), for any of the purposes specified 
in that section; 

(c) borrow money from the Development Bank or such other authority, organisation or institution 

as may be generally or specially 1[approved by the Board]; 

(d)  accept  deposits  repayable  after  the  expiry  of  such  period  and  on  such  terms  as  may  be 

generally or specially 1[approved by the Board]. 

(2)  The  Central  Government  may,  on  a  request  being  made  to  it  by  the  Small  Industries  Bank, 
guarantee the bonds and debentures issued by that Bank as to the repayment of principal and the payment 
of interest at such rate as may be fixed by that Government. 

2[16. Investment.—The Small Industries Bank may invest (whether by way of deposits in banks or 
otherwise)  the  amounts  available  in  the  Small  Industries  Development  Assistance  Fund  or  the  Small 
Industries General Fund or any other fund or account which are not for the time being required for the 
transaction of business in such manner as may be approved by the Board.] 

17. Power to transfer rights.—The rights and interests of the Small Industries Bank (including any 
other rights incidental thereto) in relation to any loan or advance granted, or any amount recoverable, by it 
may be transferred by the Small Industries Bank, either in whole or in part, by the execution or issue of 
any instrument or by the transfer of any instrument by endorsement, or in any other manner in which the 
rights  and  interests  in  relation  to  such  loan  or  advance  may  be  lawfully  transferred,  and  the  Small 
Industries Bank may, notwithstanding such transfer, act as the trustee for the transferee. 

18. Power to acquire rights.—The Small Industries Bank shall have the right to acquire, by transfer 
on assignment the rights and interests of any public financial institution as defined in section 4A of the 

1. Subs. by Act 7 of 2000, s. 9, for “approved by the Development Bank” (w.e.f. 27-3-2000). 
2. Subs. by s. 10, ibid., for section 16 (w.e.f. 27-3-2000). 

14 

 
                                                           
Companies Act, 1956 (1 of 1956) (including any other rights incidental thereto) in relation to any loan or 
advance  granted,  or  any  amount  recoverable  by  such  institution,  either  in  whole  or  in  part,  by  the 
execution or issue of any instrument or by the transfer of any instrument or in any other manner. 

19. Loans in foreign  currency.—(1) Notwithstanding anything  contained in the Foreign Exchange 
Regulation  Act,  1973  (46  of  1973),  or  in  any  other  enactment  for  the  time  being  in  force  relating  to 
foreign exchange, the Small Industries Bank may, for the purposes of granting loans and advances under 
this Act, borrow, with the previous consent of the Central Government  1***, foreign currency from any 
bank or financial institution in any foreign country or otherwise. 

(2) The Central Government may, where necessary, guarantee any loan taken by the Small Industries 
Bank  under  sub-section  (1)  or  any  part  thereof  as  to  the  repayment  of  principal  and  the  payment  of 
interest and other incidental charges. 

(3) All loans and advances granted by the Small Industries Bank out of foreign  currency borrowed 
under  sub-section  (1)  shall  be  expressed  in  terms  of  foreign  currency  as  equivalent  of  Indian  currency 
calculated in accordance with the rate of exchange prevailing at the time of grant thereof, and the amount 
due thereunder shall be repayable in equivalent Indian currency, calculated in accordance with the rate of 
exchange prevailing at the time of repayment of such loan or advance. 

(4) Unless otherwise provided by the Central Government, any loss or profit in connection with any 
borrowing of foreign currency under sub-section (1) for the purpose of granting loans and advances under 
this Act, or with its repayment to the concerned foreign lending agency, on account of any fluctuations in 
the exchange accruing— 

(a) during the period within which the loan or advance is repayable by the industrial concern in 
the small-scale sector or the period of actual repayment thereof by the concern, whichever is longer, 
shall be reimbursed by, or paid to, as the case may be, the recipient of such loans and advances; 

(b) after the expiry of the period specified in clause (a),— 

(i) shall be borne by the Small Industries Bank in respect of normal market fluctuations in the 

rate of foreign exchange; 

(ii) shall be reimbursed by, or paid to, as the case may be, the Central Government in respect 

of fluctuations other than the normal market fluctuations in foreign exchange. 

Explanation.—If  any  question  arises  as  to  whether  any  fluctuation  as  aforesaid  is  a  normal  market 
fluctuation or not, the same shall be decided by the Central Government whose decision thereon shall be 
final. 

20.  Grants,  donations,  etc.,  to  the  Small  Industries  Bank.—The  Small  Industries  Bank  may 

receive gifts, grants, donations, benefactions or other monies from Government or any other source. 

2[CHAPTER IVA 

SHARES 

20A. Free transferability of shares.—(1) Save as otherwise provided in sub-section (2), the equity 

shares of the Small Industries Bank shall be freely transferable. 

(2) Nothing contained in sub-section (1) shall entitle the Development Bank, the public sector banks, 
the  General  Insurance  Corporation,  the  Life  Insurance  Corporation  and  other  institutions  owned  or 
controlled by the Central Government to transfer any shares held by them in the Small Industries Bank if 
such transfer will result in reducing the equity shares held in aggregate by them to less than fifty-one per 
cent. of the issued equity share capital of the Small Industries Bank. 

1. The words “and the Development Bank” omitted by Act 7 of 2000, s. 11 (w.e.f. 27-3-2000). 
2. Ins. by s. 12, ibid. (w.e.f. 27-3-2000). 

15 

 
                                                           
20B.  Register  of  shareholders.—(1)  The  Small  Industries  Bank  shall  keep  at  its  head  office  a 
register, in one or more books, of the shareholders and shall enter therein the following particulars so far 
as they may be available, namely:— 

(i) the names, addresses and occupations, if any, of the shareholders and a statement of the shares 

held by each shareholder, distinguishing each share by its denoting number; 

(ii) the date on which each person is so entered as a shareholder; 

(iii) the date on which any person ceases to be a shareholder; and 

(iv) such other particulars as may be prescribed: 

Provided that  nothing  in  this sub-section  shall apply to  the  shares  held  with  a  depository  under  the 

Depositories Act, 1996 (22 of 1996). 

(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Small Industries 
Bank to keep the register of the shareholders in computer floppies, diskettes, compact disk or any other 
electronic form, subject to such safeguards, as may be prescribed. 

(3) Notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872), a copy of, or 
extract from, the register of the shareholders, certified to be a true copy under the hand of an officer of the 
Small Industries Bank authorised in this behalf, shall, in all legal proceedings, be admissible in evidence. 

(4) The Register of beneficial owners maintained by a depository under section 11 of the Depositories 

Act, 1996 (22 of 1996) shall be deemed to be a Register of the shareholders for the purposes of this Act. 

20C.  Trust  not  to  be  entered  on  the  register  of  shareholders.—Notwithstanding  anything 
contained in section 20B, no notice of any trust, express, implied or constructive, shall be entered on the 
register of shareholders or be receivable by the Small Industries Bank: 

Provided that nothing in this section shall apply to a depository in respect of the shares held by it as a 

registered owner on behalf of a beneficial owner. 

Explanation.—For the purposes of section 20B and this section, the expressions “beneficial owner”, 
“depository” and “registered owner” shall have the meanings respectively assigned to them in clauses (a), 
(e) and (j) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996). 

20D.  Board’s  right  to  refuse  registration  of  transfer  of  shares.—(1)  The  Board  may  refuse  to 
register  the  transfer  of  any  shares  in  the  name  of  the  transferee  on  any  one  or  more  of  the  following 
grounds, and on no other ground, namely:— 

(a) the transfer of the shares is in contravention of the provisions of this Act or regulations made 

thereunder or any other law; 

(b) the  transfer  of  the  shares,  in  the  opinion  of  the  Board,  is  prejudicial  to  the  interests  of  the 

Small Industries Bank or to the public interest; 

(c) the transfer of shares is prohibited by an order of a court, tribunal or any other authority under 

any law for the time being in force. 

(2)  The  Board  shall,  before  the  expiry  of  two  months  from  the  date  on  which  the  instrument  of 
transfer  of  shares  of the  Small  Industries  Bank  is  lodged  with  it for  the  purpose  of  registration  of  such 
transfer, not only form, in good faith, its opinion as to whether such registration ought not or ought to be 
refused on any of the grounds referred to in sub-section (1) but also,— 

(a) if  it  has  formed  the  opinion  that  such  registration  ought  not  to  be  so  refused,  effect  such 

registration; and 

(b) if it has formed the opinion that such registration ought to be refused on any of the grounds 

mentioned in sub-section (1), intimate the transferor and the transferee by notice in writing. 

(3) An appeal against the order of refusal of the Board under sub-section (2) shall lie to the Central 
Government and the procedure for filing and hearing of such appeal shall be in accordance with the rules 
made by the Central Government in this behalf. 

16 

 
20E.  Shares  to  be  securities  under  the  Indian  Trusts  Act,  1882.—Notwithstanding  anything 
contained  in  the  Indian  Trusts  Act,  1882  (2  of  1882),  the  shares  of  the  Small  Industries  Bank  shall  be 
deemed to be included among the securities enumerated in section 20 of the said Act. 

CHAPTER IVB 

MEETINGS AND PROCEEDINGS 

 20F. Annual general meeting.—(1) The Small Industries Bank shall in each year hold, in addition 
to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as 
such  in  the  notices  calling  it;  and  not  more  than  fifteen  months  shall  elapse  between  the  date  of  one 
annual general meeting and that of the next: 

Provided that the Small Industries Bank may hold the first annual general meeting within a period of 

six months from the date on which it allots shares for the first time to public for subscription: 

Provided further that the Central Government may extend the time within which any annual general 

meeting shall be held by a period not exceeding three months. 

(2) Every annual general meeting shall be called for a time during business hours, on a day that is not 
public holiday, and shall be held either at head office or at some other place within the city or town in 
which the head office is situated. 

Explanation.—For the purposes of this section, “public holiday” means a public holiday within the 

meaning of the Negotiable Instruments Act, 1881 (26 of 1881): 

Provided that no Sunday shall be deemed to be such a holiday in relation to any meeting: 

Provided  further  that  no  day  declared  by  the  Central  Government  to  be  a  public  holiday  shall  be 
deemed  to  be  such a  holiday,  in  relation to any  meeting,  unless the  declaration was  notified  before the 
issue of the notice convening such meeting. 

20G.  Matters  to  be  discussed  and  procedure  in  annual  general  meeting.—(1) The  shareholders 

present at an annual general meeting shall be entitled to discuss and adopt— 

(a) the balance-sheet and profit and loss account of the Small Industries Bank made up to the date 

on which its accounts are closed and balanced; 

(b) the report of working of the Small Industries Bank for the period covered by the accounts; 

(c) the auditor’s report on the balance-sheet and accounts; 

(d) proposals for declaration of dividend and capitalisation of reserves; 

(e) appointment of auditors referred to in sub-section (1) of section 30. 

(2) The  shareholders present  at  an  annual  general  meeting  may  also  discuss any  other  matter  to  be 

transacted at such meetings in accordance with the provisions of this Act. 

(3) The matters relating to— 

(a) the manner in which annual general meeting or other meetings are held under this Act and the 

procedure to be followed thereat; 

(b) the manner in which voting rights may be exercised and resolutions may be passed; and 

(c) the procedure for transaction of business at such meetings and related matters. 

shall be such as may be prescribed.] 

CHAPTER V 

SMALL INDUSTRIES DEVELOPMENT ASSISTANCE FUND 

21. Small Industries Development Assistance Fund.—(1) With effect from such date as the Central 
Government  may,  by  notification,  appoint,  the  Small  Industries  Bank  shall  establish  and  maintain,  a 
special fund to be called the Small Industries Development Assistance Fund. 

17 

 
(2) The  Small  Industries  Bank  may,  at  any  time,  establish  any  fund  as  part  of  the  Small  Industries 
Development  Assistance  Fund  for  such  purpose  or  purposes  as  may  be  approved  by  the  Central 
Government on the recommendation of the 1[Board], or establish any other fund as may be required by or 
under any law for the time being in force. 

22.  Credits  to  Small  Industries  Development  Assistance  Fund.—To  the  Small  Industries 

Development Assistance Fund shall be credited— 

(a) all  amounts  received  for  the  purpose  of that  Fund  by  way  of  loans,  gifts,  grants,  donations, 

benefactions or otherwise from Government or any other source; 

(b) repayments  or  recoveries  in  respect  of  loans,  advances  or  other  facilities  granted  from  the 

Fund; 

(c) income or profits from investments made from the Fund; and 

(d)  income  accruing  or  arising  to  the  Fund,  by  way  of  interest  or  otherwise,  on  account  of  the 

application of the Fund in accordance with the provisions of section 23. 

23.  Utilisation  of  Small  Industries  Development  Assistance  Fund.—The  Small  Industries  Bank 
may  disburse  or  spend  from  the  Small  Industries  Development  Assistance  Fund,  any  amount  for  such 
purposes as the Central Government may, on the recommendation of the 2[Board], specify. 

24.  Debits  to  Small  Industries  Development  Assistance  Fund.—(1)  To  the  Small  Industries 

Development Assistance Fund shall be debited— 

(a) such amounts as may from time to time be disbursed or spend under section 23; 

(b) such amounts as may be required for discharging the liabilities in respect of loans received for 

the purpose of that Fund; 

(c) any loss arising on account of investment made out of that Fund; and 

(d) such expenditure arising out of, or in  connection with, the administration and application of 

that Fund as may be determined by the Board. 

(2)  No  amount  shall  be  debited  to  the  Small  Industries  Development  Assistance  Fund  except  as 

provided for in sub-section (1). 

25.  Accounts  and  audit  of  Small  Industries  Development  Assistance  Fund.—(1)  The                 

balance-sheet and accounts of Small Industries Development Assistance Fund shall be prepared in such 
form and manner as may be prescribed. 

(2) The  Board  shall  cause  the  books  and  accounts  of  the  Small  Industries  Development  Assistance 
Fund to be closed and balanced as on the 31st day of March, each year or such other date as the 3[Board] 
may specify. 

4[(3) The Small Industries Development Assistance Fund shall be audited by the auditors, appointed 

under sub-section (1) of section 30, who shall make a separate report thereon.] 

(4)  The  provisions  of  sub-sections  (2),  (3)  and  (4)  of  section  30  shall,  so  far  as  may  be,  apply  in 

relation to the audit of the Small Industries Development Assistance Fund. 

(5) The Small Industries Bank shall furnish to the Central Government  5*** within four months from 
the  date  on  which  the  accounts  of  the  Small  Industries  Development  Assistance  Fund  are  closed  and 
balanced, a copy of balance-sheet and accounts together with a copy of its auditors’ report and a report on 
the operation of that Fund during the relevant year and the Central Government shall, as soon as may be 
after they are received by it, cause the same to be laid before each House of Parliament. 

1. Subs. by Act 7 of 2000, s. 13, for “Development Bank” (w.e.f. 27-3-2000). 
2. Subs. by s. 14, ibid., for “Development Bank” (w.e.f. 27-3-2000). 
3. Subs. by  s. 15,  ibid., for “Development Bank” (w.e.f. 27-3-2000). 
4. Subs. by s. 15, ibid., for sub-section (3) (w.e.f. 27-3-2000). 
5.  The words “and the Development Bank” omitted by s. 15, ibid. (w.e.f. 27-3-2000). 

18 

 
                                                           
 
26.  Liquidation  of  Small  Industries  Development  Assistance  Fund.—The  Small  Industries 
Development Assistance Fund shall not be closed or wound up save by order of the Central Government 
and in such manner as that Government may, 1*** direct.  

CHAPTER VI 

SMALL INDUSTRIES GENERAL FUND, ACCOUNTS AND AUDIT 

27.  Small  Industries  General  Fund.—All  receipts  of  the  Small  Industries  Bank  other  than  those 
which  are  to  be  credited  to  the  Small  Industries  Development  Assistance  Fund  under  this  Act  shall  be 
credited to a fund to be called the Small Industries General Fund and all payments by the Small Industries 
Bank,  other  than  those  which  are  to  be  debited  to  the  Small  Industries  Development  Assistance  Fund, 
shall be made out of the Small Industries General Fund. 

28. Preparation of accounts and balance-sheet.—(1) The balance-sheet and accounts of the Small 

Industries Bank shall be prepared in such form and manner as may be prescribed. 

(2)  The  Board  shall  cause  the  books  and  accounts  of  the  Small  Industries  Bank  to  be  closed  and 

balanced as on the 31st day of March each year or such other date, as the 2[Board] may specify. 

29.  Disposal  of  profits  accruing  to  Small  Industries  General  Fund.—(1)  The  Small  Industries 
Bank may establish a reserve fund to which may be transferred such sums as that Bank may deem fit out 
of the annual profits accruing to the Small Industries General Fund. 

3[(2)  After  making  provision  for  bad  and  doubtful  debts,  depreciation  of  assets  and  for  all  other 
matters for which provision is necessary or expedient or which is usually provided for by bankers and for 
the  reserve  fund  referred  to  in  sub-section  (1),  and  after  transferring  a  part  of  the  profits  to  such  other 
reserves  or  funds  as  may  be  considered  appropriate,  the  Board  may,  out  of  its  net  profits,  propose  a 
dividend.] 

30.  Audit.—4[(1)The  accounts  of  the  Small  Industries  Banks  shall  be  audited  by  auditors  duly 
qualified to act as auditors under sub-section (1) of section 226 of the Companies Act, 1956 (1 of 1956), 
who  shall  be appointed  by  the  Small  Industries  Bank  in  general  meeting  of the shareholders  out  of the 
panel of auditors approved by the Reserve Bank for such term and on such remuneration as the Reserve 
Bank may fix.] 

(2)  The  auditors  shall  be  supplied  with  a  copy  of  the  annual  balance-sheet  of  the  Small  Industries 
Bank and it shall be their duty to examine it together with the accounts and vouchers relating thereto and 
they  shall  have  a  list  delivered  to  them  of  all  books kept  by  the  Small  Industries  Bank  and  shall  at  all 
reasonable  times  have  access  to  the  books,  accounts,  vouchers  and  other  documents  of  the  Small 
Industries Bank. 

(3)  The  auditors  may,  in  relation  to  such  accounts,  examine  any  Director  or  any  officer  or  other 
employee of the Small Industries Bank and shall be entitled to require from the Board or officers or other 
employees of the Small Industries Bank such information and explanation as they may think necessary for 
the performance of their duties. 

(4) The auditors shall make a report to the Small Industries Bank upon the annual balance-sheet and 
accounts  examined  by  them  and  in  every  such  report  they  shall  state  whether  in  their  opinion  the           
balance-sheet is a full and fair balance-sheet containing all necessary particulars and properly drawn up so 
as to exhibit a true and fair view of the state of affairs of the Small Industries Bank and in case they had 
called for any explanation or information from the Board or any officer or other employee of the Small 
Industries Bank whether it has been given and whether it is satisfactory. 

1. The words “, on the recommendation of the Development Bank” omitted by Act 7 of 2000, s. 16 (w.e.f. 27-3-2000). 
2. Subs. by s. 17, ibid., for  “Development Bank” (w.e.f. 27-3-2000). 
3. Subs. by  s. 18, ibid., for sub-section (2) (w.e.f. 27-3-2000). 
4. Subs. by s. 19, ibid., for sub-section (1) (w.e.f. 27-3-2000). 

19 

 
                                                           
(5) The Small Industries Bank shall furnish to the Central Government  1*** within four months from 
the date on which its accounts are closed and balanced, a copy of its balance-sheet and accounts together 
with a copy of the auditors’ report and a report of the working of the Small Industries Bank during the 
relevant year, and the Central Government shall, as soon as may be after they are received by it, cause the 
same to be laid before each House of Parliament. 

31. Saving.—Save as otherwise provided in sub-section (4) of section 25, nothing contained in this 

Chapter shall apply to the Small Industries Development Assistance Fund. 

CHAPTER VII 

TRANSFER OF PART OF BUSINESS OF DEVELOPMENT BANK 

32.  Transfer  of  part  of  business  of  Development  Bank.—(1)  On  such  date  as  the  Central 
Government may, by notification, appoint, the business, assets and liabilities, rights, interests, privileges 
and  obligations  of  the  Development  Bank  relating  to  the  Small  Industries  Development  Fund  and  the 
National Equity Fund (hereinafter in this section referred to as Fund) shall stand transferred to, and vest 
in, the Small Industries Bank. 

Explanation.—“Small  Industries  Development  Fund”  and  “National  Equity  Fund”  mean  the  Small 
Industries Development Fund and National Equity Fund referred to as such in the books and accounts of 
the Development Bank on the day immediately preceding the date appointed in this sub-section. 

(2) For the transfer to, and vesting in, the Small Industries Bank under sub-section (1) of the Funds, 
that  Bank  shall  pay  to  the  Development  Bank  such  amount  and  on  such  terms  and  conditions  as  the 
Development Bank may determine. 

(3)  All  contracts,  deeds,  bonds,  agreements,  powers  of  attorney,  grants  of  legal  representation  and 
other instruments of whatever nature which relate to the Funds and which are subsisting or having effect 
immediately before the date referred to in sub-section (1) and to which the Development Bank is a party 
or which are in favour of the Development Bank shall,— 

(a) if they relate exclusively to the Funds, be of full force and effect against or in favour of the 
Small Industries Bank and may be enforced and acted upon as fully and effectively as if, instead of 
the  Development  Bank,  the  Small  Industries  Bank  had  been  a  party  thereto  or  as  if  they  had  been 
issued in favour of the Small Industries Bank; and 

(b) if they relate not only to the Funds but also to any of the other business or functions of the 
Development Bank, be of full force and effect against or in favour of both the Development Bank and 
the Small Industries Bank and may be enforced or acted upon as fully and effectively as if, in addition 
to the Development Bank, the Small Industries Bank had also been a party thereto or as if they had 
been issued in favour of the Development Bank and also the Small Industries Bank. 

(4) If, on the date referred to in sub-section (1), any suit, appeal or other legal proceeding of whatever 
nature  relating  to  the  Funds  is  pending,  the  same  shall  not  abate,  be  discontinued  or  be  in  any  way 
prejudicially  affected  by  reason  of  the  transfer  to  the  Small  Industries  Bank  of  the  business  of  the 
Development Bank or of anything contained in this Act, but the suit, appeal or other proceeding may,— 

(a) where it relates exclusively to the Funds, be continued prosecuted and enforced by or against 

the Small Industries Bank; and 

(b) where it relates not only to the Funds but also to any of the other business or functions of the 
Development Bank be continued, prosecuted and enforced by or against the Development Bank and 
the Small Industries Bank or, if the Central Government by order in writing so directs, by or against 
such one of them, as may be specified in such order. 

(5) If any question arises as to whether any contract, deed, bond, agreement, power of attorney, grant 
of legal representation or other instrument referred to in sub-section (3) or any suit, appeal or other legal 

1. The words “and the Development Bank” omitted by Act 7 of 2000, s. 19 (w.e.f. 27-3-2000). 

20 

 
                                                           
proceeding referred to in sub-section (4) relates or relate exclusively to the Funds it shall be referred to 
the Development Bank for decision and the decision of the Development Bank thereon shall be final. 

(6)  The  provisions  of  this  section  shall  have  effect  notwithstanding  anything  contained  in  the 
Industrial Development Bank of India Act, 1964 (18 of 1964), or any other law or any instrument having 
force by virtue of the said Act or other law. 

CHAPTER VIII 

MISCELLANEOUS 

33. Staff of Small Industries Bank.—(1) The Small Industries Bank may appoint such number of 
officers  and  other  employees  as  it  considers  necessary  or  desirable  for  the  efficient  performance  of  its 
functions and determine the terms and conditions of their appointment and service. 

(2) At any time before the expiry of six months from the appointed day, the Development Bank may, 
in public interest, transfer to the Small Industries Bank such members of its staff whom the Development 
Bank considers as relevant to, or suitable for, the functions of the Small Industries Bank, as on deputation 
with the Small Industries Bank, but such members shall hold office by the same tenure and upon the same 
terms  and  conditions  of  service  as  respects  remuneration,  leave,  provident  fund,  retirement  or  other 
terminal  benefits  as  they  would  have  held  such  office  if  the  Small  Industries  Bank  had  not  been 
established  and  shall  continue  to  do  so  until  the  Development  Bank  either  on  its  own  motion  or  at  the 
request of the Small Industries Bank recalls such member of staff to its service: 

Provided that every member of the staff so transferred may elect to go back to the Development Bank 
by  exercising  an  option  in  writing  to  that  effect  before  the  expiry  of  a  period  of  nine  months  from  the 
appointed day and on the exercise of such option, the Development Bank shall, before the expiration of a 
period of eighteen months from the appointed day, take back such member of the staff and he shall be 
deemed to have been on deputation to the Small Industries Bank during the period he was a member of 
the staff of the Small Industries Bank. 

(3) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947) or in any 
other law for the time being in force, the absorption of any member of the staff by the Small Industries 
Bank in its regular service under this section shall not entitle such employee to any compensation under 
that Act or other law and no such claim shall be entertained by any court, tribunal or other authority. 

Explanation.—For the purposes of this section, “appointed day” means the date of establishment of 

the Small Industries Bank under section 3. 

34. Delegation of powers.—The Board may, by general or special order, delegate to any Director or 
committee constituted under section 12 or to any officer or other employee of the Small Industries Bank, 
subject to such conditions and limitations, if any, as may be specified in the order, such of its powers and 
duties under this Act as it may deem necessary. 

35.  Returns.—The  Small  Industries  Bank  shall  furnish  from  time  to  time  to  1[the  Central 

Government and the Reserve Bank] such returns as they may require. 

36.  Obligations  as  to  fidelity  and  secrecy.—(1)  The  Small  Industries  Bank  shall  not,  except  as 
otherwise required by this Act or any other law, divulge any information relating to, or to the affairs of, its 
constituents  except  in  circumstances  in  which  it  is,  in  accordance  with  the  law  or  practice  and  usage 
customary  among  bankers  necessary  or  appropriate  for  the  Small  Industries  Bank  to  divulge  such 
information. 

(2) The Small Industries Bank may, for the purpose of the efficient discharge of the functions under 
this  Act,  collect  from  or  furnish  to  the  Central  Government,  Reserve  Bank,  Development  Bank,  State 
Bank,  any  subsidiary  bank,  nationalised  bank  or  other  scheduled  bank,  State  Cooperative  Bank,  State 
Financial Corporation, State Industrial Development  Corporation, State Small Industries  Corporation or 

1. Subs. by Act 7 of 2000, s. 20, for “the Central Government, the Reserve Bank and the Development Bank” (w.e.f. 27-3-2000). 

21 

 
                                                           
the National Small Industries Corporation or such other institutions  1[as may be specified by the Board], 
credit information or other information as it may consider useful for the purpose, in such manner and at 
such times, as it may think fit. 

Explanation.—For the purpose of this sub-section, the expression “credit information” shall have the 
same meaning as in clause (c) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934), subject 
to the modification that “banking company” referred to therein shall mean a bank,  corporation or other 
institution referred to in this sub-section. 

(3) Every Director, member of a committee, auditor, officer or other employee of the Small Industries 
Bank    2***  whose  services  are  utilised  by  the  Small  Industries  Bank  under  the  provisions  of  this  Act, 
shall, before entering upon his duties, make a declaration of fidelity and secrecy in the form set out in the 
First Schedule to this Act. 

37. Defects in appointment not to invalidate acts, etc.—(1) No act or proceeding of the Board or of 
any committee of the Small Industries Bank shall be questioned on the ground merely of the existence of 
any vacancy in, or defect in the constitution of, the Board or the committee, as the case may be. 

(2) No act done by any person acting in good faith as a Director shall be deemed to be invalid merely 
on  the  ground  that  he  was  disqualified  to  be  a  Director  or  that  there  was  any  other  defect  in  his 
appointment. 

3[37A.  Amounts  and  securities  to  be  held  in  trust.—(1)  Any  sums  received  by  a  borrowing 
institution  in  repayment  or  realisation  of  loans  and  advances  refinanced  either  wholly  or  partly  by  the 
Small Industries Bank shall, to the extent of the accommodation granted by the Small Industries Bank and 
remaining  outstanding,  be  deemed  to  have  been  received  by  the  borrowing  institution  in  trust  for  the 
Small Industries Bank, and shall accordingly be paid by such institution to the Small Industries Bank, as 
per the repayment schedule fixed by the Small Industries Bank. 

(2) Where an accommodation has been granted to a borrowing institution, all securities held, or which 
may  be  held,  by  such  borrowing  institution,  on  account  of  any  transaction  in  respect  of  which  such 
accommodation has been granted by the Small Industries Bank, shall be held by such institution in trust 
for the Small Industries Bank.] 

38. Rights of Small Industries Bank in case of default.—(1) Where any industrial concern in the 
small-scale sector, which is under a liability to the Small Industries Bank under an agreement, makes any 
default  in  repayment  of  any  loan  or  advance  or  any  instalment  thereof  or  in  meeting  its  obligations  in 
relation to any guarantee given by the Small Industries Bank or otherwise fails to comply with the terms 
of its agreement, with the Small Industries Bank, the Small Industries Bank shall have the right to take 
over the management, or possession, or both of such industrial concern in the small-scale sector, as well 
as the right to transfer by way of lease or sale and realise the property pledged, mortgaged, hypothecated 
or assigned to the Small Industries Bank. 

(2)  Any  transfer  of  property  made  by  the  Small  Industries  Bank,  in  exercise  of  its  powers  under            

sub-section (1), shall vest in the transferee all rights in or to the property transferred as if the transfer had 
been made by the owner of the property. 

(3)  The  Small  Industries  Bank  shall  have  the  same  rights  and  powers  with  respect  to  goods 
manufactured or produced wholly or partly from goods forming part of the security held by it as it had 
with respect to the original goods. 

(4) Where any action has been taken against an industrial concern in the small-scale sector under the 
provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Small Industries 
Bank  have  been  properly  incurred  by  it  as  incidental  thereto  shall  be  recoverable  from  the  industrial 
concern  in  the  small-scale  sector  and  the  money  which  is  received  by  it  shall,  in  the  absence  of  any 
contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and 

1. Subs. by Act 7 of 2000, s. 21, for “as may be specified by the Development Bank” (w.e.f. 27-3-2000). 
2. The words “or the Development Bank” omitted by s. 21, ibid., (w.e.f. 27-3-2000). 
3.  Ins. by s. 22, ibid. (w.e.f. 27-3-2000). 

22 

 
                                                           
expenses and, secondly, in discharge of the debt due to the Small Industries Bank, and the residue of the 
money so received shall be paid to the person entitled thereto in accordance with his rights and interests. 

(5)  Where  the  Small  Industries  Bank  takes  over  the  management  or  possession  of  an  industrial 
concern in the small-scale sector under the provisions of sub-section (1), the Small Industries Bank shall 
be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall 
sue and be sued in the name of the concern. 

39.  Power 

to 

seek  assistance  of  Chief  Metropolitan  Magistrate  or  District                   

Magistrate.—(1) Where any property, effects or actionable claims are sold or leased in pursuance of any 
power conferred by section 38, the Small Industries Bank or any other person authorised by it may, for 
the  purpose  of  taking  into  custody  or  under  control  any  such  property,  effects  or  actionable  claims, 
request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction 
any such property, effects, actionable claims, books of account or other documents relating thereto may 
be  situated  or  found,  to  take  possession  thereof,  and  the  Chief  Metropolitan  Magistrate  or  the  District 
Magistrate shall, on such request being made to him,— 

(a) take  possession  of  such  property,  effects,  actionable  claims,  or  books  of  account  or  other 

documents relating thereto; and 

(b) forward them to the Small Industries Bank or such other person, as the case may be. 

(2)  For  the  purpose  of  securing  compliance  with  the  provisions  of  sub-section  (1),  the  Chief 
Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or 
cause to be used, such force as may, in his opinion, be necessary. 

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this 

section shall be called in question in any court or before any authority. 

40.  Power  to  call  for  repayment  before  agreed  period.—Notwithstanding  anything  in  any 
agreement  to  the  contrary,  the  Small  Industries  Bank  may,  by  notice  in  writing,  require  any  industrial 
concern in the small-scale sector to which it has granted any loan or advance to discharge forthwith in full 
its liabilities to the Small Industries Bank,— 

(a) if it appears to the Board that false or misleading information in any material particular was 

given in the application for the loan or advance; or 

(b) if  the  industrial  concern  in  the  small-scale  sector  has  failed  to  comply  with  the  terms  of  its 

contract with the Small Industries Bank in the matter of the loan or advance; or 

(c) if  there  is  a  reasonable  apprehension  that  the  industrial  concern  in  the  small-scale  sector  is 

unable to pay its debt or that proceedings for liquidation may be commenced in respect thereof; or 

(d) if the property pledged, mortgaged, hypothecated or assigned to the Small Industries Bank as 
security for the loan or advance is not insured and kept insured by the industrial concern in the small-
scale sector to the satisfaction of the Small Industries Bank; or depreciates in value to such an extent 
that, in the opinion of the Board, further security to the satisfaction of the Board should be given and 
such security is not given; or 

(e) if,  without  the  permission  of  the  Board,  any  machinery,  plant  or  other  equipment,  whether 
forming part of the security or otherwise, is removed from the premises of the industrial  concern in 
the small-scale sector without being replaced; or 

(f) if for any reason it is necessary to protect the interests of the Small Industries Bank. 

41.  Special  provisions  for  enforcement  of  claims  by  Small  Industries  Bank.—(1)  Where  an 
industrial concern in the small-scale sector, in breach of any agreement, makes any default in repayment 
of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee 
given by the Small Industries Bank or otherwise fails to comply with the terms of its agreement with that 
Bank,  or  where  the  Small  Industries  Bank  requires  any  industrial  concern  in  the  small-scale  sector  to 
make repayment of any loan or advance under section 40 and such industrial concern fails to make such 

23 

 
repayment,  then,  without  prejudice  to  the  provisions  of  section  38  of  this  Act  and  section  69  of  the 
Transfer of Property Act, 1882 (4 of 1882), any officer of that Bank, generally or specially authorised by 
that Bank in this behalf, may apply, to the Court for one or more of the following reliefs, namely:— 

(a) for  an  order  for  the  sale  of  the  property  assigned,  charged,  hypothecated,  mortgaged  or 

pledged to that Bank as security for the loan or advance; or 

(b) for enforcing the liability of any surety; or 

(c) for an  ad interim injunction restraining the industrial  concern in the small-scale sector from 
transferring  or  removing  its  machinery,  plant  or  equipment  from  the  premises  of  such  industrial 
concern  without  the  permission  of  the  Small  Industries  Bank,  where  such  transfer  or  removal  is 
apprehended. 

(2)  An  application  under  sub-section  (1)  shall  state  the  nature  and  extent  of  the  liability  of  the 
industrial concern in the small-scale sector to the Small Industries Bank, the ground on which it is made 
and such other particulars as may be necessary for obtaining the relief prayed for. 

(3) Where the application is for the reliefs mentioned in clause (a) and clause (c) of sub-section (1), 
the Court shall pass an ad interim order attaching the security, or so much of the property of the industrial 
concern in the small-scale sector as would on being sold realise in its estimation an amount equivalent in 
value  to  the  outstanding  liability  of  such  industrial  concern  to  the  Small  Industries  Bank  together  with 
costs of the proceedings taken under this section with or without an ad interim injunction restraining such 
industrial concern from transferring or removing its machinery, plant or equipment. 

(4) Where the application is for the relief mentioned in clause (b) of sub-section (1), the Court shall 
issue a notice calling upon the surety to show cause on a date to be specified in the notice as to why the 
liability should not be enforced. 

(5) Before passing any order under sub-section (3) or issuing a notice under sub-section (4), the Court 

may, if it thinks fit, examine the officer making the application. 

(6) At the same time as it passes an order under sub-section (3), the Court shall issue to the industrial 
concern in the small-scale sector or to the owner of the security attached, a notice accompanied by copies 
of the order, the application and the evidence, if any, recorded by the Court calling upon such industrial 
concern or owner, to show cause on a date to be specified in the notice, as to why the ad interim order of 
attachment should not be made absolute or the injunction confirmed. 

(7) If no cause is shown, on or before the date specified in the notice under sub-section (4), the Court 

shall forthwith order the enforcement of the liability of the surety. 

(8) If no cause is shown on or before the date specified in the notice under sub-section (6), the Court 
shall forthwith make the ad interim order absolute and direct the sale of the attached property or confirm 
the injunction. 

(9) If cause is shown, the Court shall proceed to investigate the claim of the Small Industries Bank in 
accordance with the provisions contained in the Code of Civil Procedure, 1908 (5 of 1908), in so far as 
such provisions may be applied thereto. 

(10) After making an investigation under sub-section (9), the Court may— 

(a) confirm the order of attachment and direct the sale of the attached property; 

(b) vary  the  order  of  attachment  so  as  to  release  a portion of the  property  from  attachment  and 

direct the sale of the remainder of the attached property; 

(c) release the property from attachment; 

(d) confirm or dissolve the injunction; or 

(e) direct the enforcement of the liability of the surety or reject the claim made in this behalf: 

Provided  that  when  making  an  order  under  clause  (c)  or  making  an  order  rejecting  the  claim  to 
enforce  the  liability  of  the  surety  under  clause  (e),  the  Court  may  make  such  further  order  as  it  thinks 

24 

 
necessary  to  protect  the  interests  of  the  Small  Industries  Bank  and  may  apportion  the  cost  of  the 
proceedings in such manner as it thinks fit: 

Provided further that unless the Small Industries Bank intimates to the  Court that it will not appeal 
against any order releasing any property from attachment or rejecting the claim to enforce the liability of 
the  surety,  such  order  shall  not  be  given  effect  to,  until  the  expiry  of  the  period  fixed  under                           
sub-section (12) within which an appeal may be preferred or, if an appeal is preferred, unless the  Court 
empowered  to  hear  appeals  from  the  decisions  of  the  said  Court  otherwise  directs,  until  the  appeal  is 
disposed of. 

(11) An order of attachment or sale of property under this section shall be carried into effect as far as 
practicable in the manner provided in the Code of Civil Procedure, 1908 (5 of 1908), for the attachment or 
sale of property in execution of a decree as if the Small Industries Bank were the decree holder. 

(12) Any party aggrieved by an order under sub-section (7), sub-section (8) or sub-section (10) may, 
within  thirty  days  from  the  date  of  the  order,  appeal  to  the  Court  empowered  to  hear  appeals  from  the 
decisions of the Court which passed the order and upon such appeal the appellate Court may, after hearing 
the parties, pass such orders as it thinks proper. 

(13) Where  proceedings  for  liquidation in respect of an  industrial  concern in  the  small-scale  sector 
have  commenced  before  an  application  is  made  under  sub-section  (1),  nothing  in  this  section  shall  be 
construed as giving to the Small Industries Bank any preference over the other creditors of such industrial 
concern not conferred on it by any other law. 

(14) For the removal of doubts, it is hereby declared that any Court competent to grant an ad interim 
injunction under this section shall also have the power to appoint a receiver and to exercise all the other 
powers incidental thereto. 

42.  Small Industries Bank  to  have  access  to  records.—(1) The  Small  Industries  Bank  shall  have 
free  access  to  all  such  records  of  any  institution  which  seeks  to  avail  of  any  credit  facilities  from  the 
Small Industries Bank and to all such records of any such person who seeks to avail of any credit facilities 
from  such  institution,  perusal  whereof  may  appear  to  the  Small  Industries  Bank  to  be  necessary  in 
connection with the providing of finance or other assistance to such institution or the refinancing of any 
loan or advance made to such person by the borrowing institution. 

(2) The Small Industries Bank may require any institution or person referred to in sub-section (1) to 
furnish to it copies of any of the records referred to in that sub-section and the institution or the person, as 
the case may be, shall be bound to comply with such requisition. 

 43. Validity of loan or advance not to be questioned.—Notwithstanding anything to the contrary 
contained in any other law for the time being in force, the validity of any loan or advance granted by the 
Small Industries Bank in pursuance of the provisions of this Act shall not be called in question merely on 
the ground of non-compliance with the requirements of such other law as aforesaid or of any resolution, 
contract, memorandum, articles of association or other instrument: 

Provided that nothing in this section shall render valid any loan or advance obtained by any company 
or  co-operative  society  where  such  company  or  co-operative  society  is  not  empowered  by  its 
memorandum to obtain loans or advances. 

44. Indemnity of Directors.—(1) Every Director shall be indemnified by the Small Industries Bank 
against all losses and expenses incurred by him in, or in relation  to, the discharge of his duties, except 
such as are caused by his own wilful act or default. 

(2) A Director shall not be responsible for any other Director or for any officer or other employee of 
the Small Industries Bank or for any loss or expenses resulting to the Small Industries Bank or from the 
insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf 
of  the  Small  Industries  Bank  or  the  insolvency  or  wrongful  act  of  any  debtor  or  any  person  under 
obligation to the Small Industries Bank or anything done in good faith in the execution of the duties of his 
office or in relation thereto. 

25 

 
45. Protection of action taken under this Act.—No suit or other legal proceeding shall lie against 
the Small Industries Bank, 1[chairman and managing director, the whole-time director] or any Director or 
any officer or other employee of such Bank or any other person authorised by that Bank to discharge any 
functions  under  this  Act  for  any  loss  or  damage  caused  or  likely  to  be  caused by  anything  which  is  in 
good faith done or intended to be done in pursuance of this Act or any other law or provision having the 
force of law. 

46.  Nomination  by  depositors  or  holders  of  bonds  or  other  securities.—(1) Notwithstanding 
anything  contained  in  any  other  law,  where  a  nomination  in  respect  of  any  deposits,  bonds  or  other 
securities kept with or issued by the Small Industries Bank is made in the prescribed manner, the amount 
due on such deposits, bonds or other securities shall, on the death of the depositor or holder thereof, vest 
in,  and  be  payable  to,  the  nominee  subject  to  any  right,  title,  interest  or  claim  of  any  other  person,  in 
relation to such deposits, bonds or other securities. 

(2) Any payment by the Small Industries Bank in accordance with the provisions of sub-section (1) 

shall be a full discharge of its liability in respect of such deposits, bonds or securities. 

47. Arrangement with Small Industries Bank on appointment of directors to  prevail.—(1) Where 
any  arrangement  entered  into  by  the  Small  Industries  Bank  with  an  industrial  concern  in  the  small-scale 
sector provides for the appointment by the Small Industries Bank of one or more directors of such industrial 
concern,  such  provision  and  any  appointment  of  directors  made  in  pursuance,  thereof  shall  be  valid  and 
effective notwithstanding anything to the contrary contained in the Companies Act, 1956  (1 of 1956), or in 
any  other  law  for  the  time  being  in  force  or  in  the  memorandum,  articles  of  association  or  any  other 
instrument  relating  to  that  industrial  concern,  and  any  provision  regarding  share  qualification,  age-limit, 
number of directorships, removal from office of directors and such like conditions contained in any such 
law  or  instrument  aforesaid,  shall  not  apply  to  any  director  appointed  by  the  Small  Industries  Bank  in 
pursuance of the arrangement as aforesaid. 

(2) Any director appointed as aforesaid shall— 

(a) hold  office  during  the  pleasure  of  the  Small  Industries  Bank  and  may  be  removed  or 

substituted by any person by order in writing of the Small Industries Bank; 

(b) not incur any obligation or liability by reason only of his being a director or for anything done 
or omitted to be done in good faith in the discharge of his duties as a director or anything in relation 
thereto; 

(c) not be liable to retirement by rotation and shall not be taken into account for computing the 

number of directors liable to such retirement. 

48. Act 18 of 1891 to apply in relation to Small Industries Bank.—The Bankers’ Books Evidence 
Act, 1891 shall apply in relation to Small Industries Bank as if it were a bank as defined in section 2 of 
that Act. 

49.  Act  10  of  1949  not  to  apply  to  Small  Industries  Bank.—Nothing  contained  in  the  Banking 
Regulation Act, 1949, except section 34A and section 36AD thereof, shall apply to the Small Industries 
Bank. 

50.  [Act  43  of  1961  not  to  apply  to  Small  Industries  Bank.]—Omitted    by  the  Finance  Act,  2001              

(14 of 2001), s. 142 (w.e.f 1-4-2002). 

51.  Liquidation  of  Small  Industries  Bank.—No  provision  of  law  relating  to  the  winding  up  of 
companies or corporations shall apply to the Small Industries Bank and that Bank shall not be placed in 
liquidation save by order of the Central Government and in such manner as it may direct. 

2[51  A.  Power  to  make  rules  by  Central  Government.—(1)  The  Central  Government  may,  by 

notification, make rules to carry out the provisions of this Act. 

1. Subs. by Act 7 of 2000, s. 23, for “chairman” (w.e.f. 27-3-2000). 
2. Ins. by Act 7 of 2000, s. 24 (w.e.f. 27-3-2000). 

26 

 
                                                           
(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

(i)  the  procedure  for  filing  and  hearing  of  appeal  against  the  refusal  to  register  the  transfer  of 

shares by the Board under sub-section (3) of section 20D; and 

(ii) any other matter which has to be, or may be, prescribed by rules under this Act.] 

52.  Power  to  make  regulations.—(1)  The  Board  may  1***  by  notification,  make  regulations  not 
inconsistent with the provisions of this Act to provide for all matters for which provision is necessary or 
expedient for the purpose of giving effect to the provisions of this Act. 

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may 

provide for— 

2[(a) the removal of Director under sub-section (8) of section 6; 

(aa) the places of meetings of the Board under this Act and the procedure to be followed at such 
meetings including the quorum necessary for transaction of business and the manner of adoption of 
resolution under section 6; 

(ab) the  functions  to  be  discharged  by  the  Executive  Committee  under  sub-section  (2)  of              

section 12; 

(ac) the places of meetings of the Executive Committee and the procedure to be followed at such 

meetings under sub-section (4) of section 12; 

(ad) such fees and allowances which may be paid to the directors and members of the Executive 

Committee under section 12A; 

(ae) the  particulars  to  be  prescribed  in  the  register  of  shareholders  under  clause  (iv)  of                        

sub-section (1) of section 20B; 

(af) the  procedure  relating  to  maintenance  of  register  of  shareholders  in  electronic  form  under 

sub-section (2) of section 20B; 

(ag) the matters relating to the annual general meeting under sub-section (3) of section 20G;] 

(b) the  form  and  manner  in  which  the  balance-sheets  and  the  accounts  of  the  Small  Industries 
Development  Assistance  Fund  under  sub-section  (1)  of  section  25  and  the  Small  Industries  Bank 
under sub-section (1) of section 28 shall be prepared; 

(c) the manner in which nominations may be made in terms of sub-section (1) of section 46; 

(d) generally the efficient conduct of the affairs of the Small Industries Bank; 

(e) any other matter which is to be, or may be, prescribed. 

3[(3) Every rule made by the Central Government, and every regulation made by the Board under this 
Act  shall  be  laid,  as  soon  as  may  be  after  it  is  made,  before  each House  of  Parliament,  while  it  is  in 
session  for  a  total  period  of  thirty  days  which  may  be  comprised  in  one  session  or  in  two  or  more 
successive  sessions,  and  if,  before  the  expiry  of  the  session  immediately  following  the  session  or  the 
successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or 
both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter 
have effect only in such modified form or be of no effect, as the case may be; so, however, that any such 
modification or annulment shall be without prejudice to the validity of anything previously done under 
that rule or regulation.] 

1. The words “with the previous approval of the Development Bank” omitted by Act 7 of 2000, s. 25 (w.e.f. 27-3-2000). 
2. Subs. by s. 25, ibid., for clause (a) (w.e.f. 27-3-2000). 
3. Subs. by s. 25, ibid., for sub-section (3) (w.e.f. 27-3-2000). 

27 

 
 
 
                                                           
[53.  Amendment  of  certain  enactments.]—Rep.  by  the  Repealing  and  Amending  Act,  2001                      

(30 of 2001), s. 2 and The First Schedule (w.e.f. 3-9-2001).  

54. Power to remove difficulties.—If any difficulty arises in giving effect to the provisions of this 
Act, the Central Government may, in consultation with the Development Bank, by order, do anything, not 
inconsistent with such provisions, for the purpose of removing the difficulty: 

Provided that no such order shall be made after the expiration of three years from the date on which 

this Act receives the assent of the President. 

28 

 
 
 
 
THE FIRST SCHEDULE 

[See section 36(3)] 

Declaration of fidelity and secrecy 

I,........................., do hereby declare that I will faithfully, truly and to the best of my skill and ability 
execute and perform the duties required of me as director, member of............. committee, auditor, officer, 
other  employee  (as  the  case  may  be)  of  the  Small  Industries  Development  Bank  of  India  and  which 
properly relate to the office or position held by me in or in relation to the said Bank. 

I further declare that I will not communicate or allow to be communicated to any person not legally 
entitled thereto any information relating to the affairs of the Small Industries Development Bank of India 
or to the affairs of any person having any dealing with the said Bank, nor will I allow any such person to 
inspect  or  have  access  to  any  books  or  documents  belonging  to  or  in  the  possession  of  the  said  Bank 
relating to the business of the said Bank or the business of any person having any dealing with the said 
Bank. 

Signed before me. 

                    (Signature) 

______ 

[THE SECOND SCHEDULE].—Rep. by the Repealing and Amending Act, 2001(30 of 2001), s. 2 and 

The First Schedule (w.e.f. 3-9-2001).  

29 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
